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Motivation and Incentives in the Workforce

W. Edwards Deming, often referred to as the leading quality guru in the United States, and psychologist Alfie Kohn support the idea that incentive pay is not a motivator for individuals to do a good job. Yet economists argue that incentive compensation does work and as economist George Baker notes in his 1993 article in the Harvard Business Review titled "Rethinking Rewards," "The problem is not that incentives can't work but that they work too well." What does Baker mean? Discuss the importance of a well-developed compensation plan in attracting and retaining good employees and how to keep those plans from "working too well."

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See my below response. I hope it helps you gain some insight on your assignment. Please let me know if you have further questions and we will work through it.

A perfect (and cute) example of when incentives start out great, but then go south was experienced and written by Steve Levitt in the book Freakonomics. I read this book years ago, and yet it was the first thing to come to mind when reading your posting. Therefore, it goes to reason that if a potty training toddler is that smart, certainly grown, educated, experienced adults would exhibit an even higher level of strategy when incentives are not well proportioned with other motivating factors that drive us. This potty training with M&Ms example is what George Baker is referring to when he said that sometimes incentives work too well.

Freakonomics potty training video:

Extrinsic motivational factors - Money, bonuses - short term motivators
Intrinsic motivational factors - Job satisfaction, recognition for a job well done, personal development - long-term motivators

Look up Maslow's hierarchy of needs. It breaks down everyone's needs ...

Solution Summary

This solution discusses incentive plans and other intrinsic incentives for long term employee motivation and job satisfaction.